Why the Zimbabwe Exchange rate is running as if there is no tomorrow

Self-Inflicted Wounds

We are now 9 months into the Transitional Stabilisation Program and a great deal has been achieved. Let’s summarie:

– We have eliminated the Fiscal deficit that was the main driver in the past 5 years under Mr. Mugabe, of inflation and rising domestic debt on an unsustainable basis;

– When we delinked the US dollar from the RTGS dollar/bond currencies, we held about US$200 million in private Nostro accounts, today we are approaching US$1 billion;

– We have created an interbank market for foreign currencies and this has started to function and attract foreign exchange balances;

– Despite rising inflation (expected to be short term) we have resisted any form of price control except on certain staples and essential inputs (energy);

– We have imposed on all Government Ministries and Parastatals strict financial discipline and controls on all expenditure; and

– We have concluded a new Staff Monitored Program with the IMF and in the back ground paper to that decision, the Fund has recognized the very considerable progress made.

These are not small steps forward; they are giant strides taken in very difficult conditions. It is now recognized that our basic macroeconomic fundamentals are sound. Why then is the exchange rate running as if there is no tomorrow and the chaos in markets as people struggle to discover what price they should be charging for anything. Living standards have collapsed and the great majority of people cannot even afford the basics or get to work. Something is fundamentally wrong. The question is what?

Over the past 39 years of Independence we have created a network of corrupt individuals and organisations that has involved the decision makers in Government and in many parts of the private sector and which has been able to syphon off from our economy perhaps as much as US$120 billion.

The fact that we are still standing despite this massive drain on our resources and economic activity, is because the great majority of our people have retreated into the informal economy where they do not pay taxes and avoid scrutiny for what they are doing while they try to make a living. Even the IMF estimates that we are over 60 per cent informalised.

We have even invested names for them – ‘Queen Bee’ (why not King Bee’?)’ and called them ‘Cartels’ because they work closely together to protect their activities and wealth. The evidence is all around us – massive houses that would be better located on Hollywood Boulevard.

Rumors of expensive houses in all parts of the world involving people from the President down to relatively low ranking Civil Servants and people in the Security Forces. Yesterday I had breakfast with some friends and when I went out to collect my car, it was parked next to a top of the range Bentley – worth probably several hundred thousand dollars.

Young people drive around in expensive cars and exhibit an arrogance that can only come from wealth, privilege and protection. Flights to Dubai for shopping are fully booked each week. Yet we cannot pay our staff a living wage.

How do we deal with the malady – I would like to follow Jerry Rawlings example; when he took over in Ghana, he had the Police arrest 15 major and well known corrupt people, took them down to the beach and had them executed in front of a crowd of 15 000 people.

The Chinese Government had an Official who was number 3 in the Politburo arrested in a Politburo meeting and three days later he was executed for a crime that we in poor, impoverished Zimbabwe, would regard as petty cash. Too harsh? Not at all when you understand how quickly corruption can become embedded in a society and cripple the real economy.

Continued next page

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